New Delhi: Demand for insurance cover for terrorism is likely to rise in the wake of Mumbai attacks—even in smaller cities—and premiums for such cover would also increase, say experts.
“One can expect the demand for terrorism cover to go up... In India, the cover is taken by only a few major hotel chains. The incident (Mumbai terror attack) can create awareness and raise demand for such products (even in small cities),” said R. Krishnamurthy, managing director of Watson Wyatt, a consultancy that provides actuarial advice to its clients. Actuaries correlate statistical calculations, especially of life expectancy, required to arrive at insurance probabilities.
Cover against terrorism is typically offered as an add-on with property insurance, but is also available as a stand-alone for individuals.
As many as 12 Indian cities, including Mumbai, have suffered acts of terrorism in the past seven months, and the frequency of such attacks have quickened in the past two years, Mint reported on Thursday.
According to Rajive Kumaraswami, head, reinsurance, ICICI Lombard General Insurance Co. Ltd, the number of individuals and firms opting for terrorism insurance “is on the rise due to heightened awareness”.
The increased demand will lead to a rise in premiums for such policies, said Deepak Sood, chief executive of Future Generali India Insurance Co. Ltd. “With frequent terrorist attacks, it can be revised now,” he said.
T.A. Ramalingam, head, underwriting, Bajaj Allianz General Insurance Co. Ltd, said: “The premium rates (for terrorism insurance) are determined by the pool managers and the owners jointly. It is difficult to say at this stage what would be the immediate impact on rates. Considering the fact that for the past six months we seem to be having terrorist attacks frequently, there could be a review of (premium) rates.”
“Generally, it has been the trend that the demand surges whenever there is a tragic event,” he added.
India’s Insurance Regulatory Development Authority has mandated that all general insurance companies collect premiums from terrorism covers in a common pool.
Terrorism-related insurance claims are settled using funds from this common pool, created after the World Trade Centre attack in the US in 2001 when overseas reinsurers stopped underwriting risks. Currently the pool is worth Rs750 crore.
Reinsurance companies provide insurance to insurers.
“We will need more reinsurance support for terrorism covers,” said Watson Wyatt’s Krishnamurthy.